Mechanistic vs Institutional Government

Energy policy from an Austrian perspective: “Britain’s 3 pin energy policy” (5 Apr 2011)

There are two approaches to government and economics:

  • Mechanistic
  • Institutional

By “mechanistic”, I mean governments calculating what ought to happen, and then designing schemes to try to make it happen. It’s the “lever-pulling” school of government.

By “institutional”, I mean

  • recognising the limits to central knowledge,
  • and maintaining the minimum apparatus of government necessary to define and enforce the boundaries and remedies where one person’s freedom intrudes unacceptably on another’s.
  • Within such a framework, we discover rather than calculate the more or less efficient responses to evolving understanding and circumstances,
  • harnessing diffuse knowledge through the processes of voluntary exchange and creative destruction.

You can see the attraction of the mechanistic approach, if only from the simplicity and brevity of its exposition.

Indeed, it has proved sufficiently seductive for the mechanistic approach to come to dominate our thinking over the course of the twentieth century, to the extent that most people now take it for granted.

The need for governments to pull levers to “correct” any identified issue is treated by many people as implicit in the identification of the issue.

Yet I would argue that our prosperity and liberty in the modern Anglosphere was founded on the institutional approach, and that many of the failings of modern policy-making stem from our adoption of the mechanistic approach.

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